Analysing log data density

[jpfeifer]

Sorry, but I don’t understand the question. What does volatility have to do with this? Also, please see

Model Comparison Bayesian Estimation (again)

Basically all your answers are in Koop’s 2003 textbook “Bayesian Econometrics” on pages 4-5. For Bayesian model comparison models do not need to be nested and there is a natural degrees of freedom correction. Hence, as long as you use the same data having different parameters does not matter at all. Short answer: that is sufficient. Longer answer: the prior over the parameters does not matter but the prior odds ratio over the models (see Koop (2003), p. 4). If you a priori assign equal probab…